Dan Grigsby Shares Secrets of Successful Entrepreneurship

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Bio Dan is the founder of Merchant Planet, an early e-commerce provider ultimately acquired by Microsoft. Then he was the founder and initial developer of payMe.com, a successful early-days competitor to PayPal. Lately, he's been working with startups and as a turn around CTO.

I categorize myself as a programmer/entrepreneur. I am a business guy, but I write my own code. I come up with ideas and then I want to put them on the market and test them to be able to make a living out of it, so it's an Agile approach to entrepreneurship.

I think it went great. It's a challenge to present a business topic to a technical audience, but I've seen enough of this kind of talks and I always recognize that there were places that business people neglected, they dropped out. They didn't show some of the secret sauce that goes behind making a real business. I think there really is an interesting opportunity for developers these days. At the Rails Conference, there was a lot of talk about how productive we are as developers and introduced this notion of surplus. There is this question "What do you do with this time that you have, because you are such a better productive individual?" Some of the people said "Let's go out and work on an open source product that would do this and that."

I think what you can do is take that and you can turn it to your advantage. You can say "I am going to write my own product and I am going to use the extra time that I'd use coding that I don't need to use because I've already written the thing, to actually turn it into a business." The talk was a serious one, a kind of marketing hax, ways that technical people can push their products out and get them in front in of people without turning them into salespeople or try to make you a manager of other developers. It's a developer that is an entrepreneur at a very small scale. You can be a hacker and earn a living while doing it and so on. That was a fun topic and I think it went on pretty well.

Even smaller than that. That's a great question. I look at - I guess you'd call it - orders of magnitude. People talk about lies, damn lies and statistics. Well, orders of magnitude are like statistics here. These days, when I look at the ideal team size for me, if I am going to build anything I can probably build it with 3 good developers. If you roll back the clock and you go at a decade level granularity, 10 years ago you needed 30 people, and 10 years before that - so 1989 - I would need 300 people to build the same product.

You look at a site like ICanHasCheezBurger - these guys employ 9 people and that's cool. I think it's spectacular that silly cat pictures and captions can employ 9 people profitably, but if you go back these 10 years increments, you definitely can't make a business around that with 90 people and you certainly can't do it with 900. We live in this time when we have great toolkits - there is service side with Rails or Merb or any of the great frameworks, or the client side with all the great Java scripting frameworks and tools and CSS and so on. You have really productive developers and what that means is when you are at that little end of the scale, you got great control over what you do, you hang out with really good people. You don't have to delude your super talent with average talent because you are always trying to grow the team's size; then, what you can do is try different ideas.

I hang out with my 3 guys and I can come up with an idea - tested- another idea - tested -. We almost take that venture capital portfolio theory and apply it to ourselves. There are a lot of parallels to TDD and the kind of things that we do to ensure software quality. All this measurability, actually really applies to trying ideas in the market place. I think it's a great time to be a small team developer, particularly an entrepreneurial one.

Yes, you do. It's darwinistic, and the thing that I wanted to get across on the talk yesterday was that a lot of times they leave the hole how you bring the ideas to the people, how you get people to see your idea, as an exercise to the listener. I think marketing and sales is kind of scary to the developer mind. I have a mom who's a marketer and a dad who is a coder and so I am hybrid. I apply hax to marketing. When I look at trying to get my ideas in front of people, I don't want to go to Google and buy Google's Adwords. Google is an efficient market, if a company produces a product where the end customer is worth a 100$ to them, Google is going to try and charge you 99$ to get it. They want to push their margin all the way up.

The problem as an Agile entrepreneur, as a person who is creating your own products is that you put yourself into the pool with all the other folks who are trying to get those same customers and there is always somebody richer than you. If you can come up with clever hax, you can find the same kind of 10x productivity to push the market as you do when you push your development skills. I think that's really interesting. It's half of the talk, talking about this marketing hax, that are all tech driven building spiders and finding unexpected relationships between data that you use to get to the people that you are trying to get to use your product.

It's interesting, you go through life and you develop a muscle memory - you are doing something every day, you don't necessarily take the time to think about it. "OK, I've arrived at this point where I've got a career. My career has pieces of entrepreneurship and marketing and sales and this and that." Every so often, someone will come along and will say something that helps you crystallize what you've been thinking about. For a long time, long before Rails I was using Perl and I was using it with what people called toy languages.

I was using these things because they gave me productivity. I didn't get wrapped around the axel about having some kind of superframework in this, I wanted it lean and narrow. When he used that word - "surplus" I said "Ah, that's exactly it!" I've never had a day job, I don't want to have to be slotted into this kind of thing because I felt I can do the programmer job and then I can use what I had at that time identified as surplus to go off and make the business around it. It was like a lightning rod. I think David as a life coach had some really interesting things to say. In my particular case it crystallized the way I've always been working. Being able to take that crystallization and try to reproduce it, try to get other people to take on this life style was a fun challenge for the talk.

That's interesting - when I was putting this together I was thinking about examples to put in it and I used one. I used ICanHasCheezBurger. There are lots of well known examples of these: TinyURL was written actually by a guy who lives in the Minneapolis, where I am from, and he wrote it because he was an avid unicycle list and he wanted to be able to short URLs into a unicycle list message board because he did trunk editing over at the line. It was estimated that he could make a million dollars a month right now if he put in ..., but he has realized that he makes him a living at a certain scale and if he tries to subvert it, then it gets poison and he loses it.

There are some other examples that are interesting - I was signing with an Angel investor and he told me that he'd made an investment in a company whose entire product was to help simulate oil rigs shooting off live saving rafts to people who had fallen off the rig. When you think what it does, it identifies tiny little markets that you wouldn't even think about. When someone asks you a question about one of the examples of this, you can give 20 examples and one of them is going to resonate with the person who is listening to it because most people would never think about oil rigs and people falling off and they need to be able to safely rescue them but this have gotten out and have lined up - I think it's Exxon mobile and BP and so there are all these crazy little segments.

I was talking with someone here at the conference who said that they have an application that is workflow automation for the sign industry. I don't have a passion for the sign industry, but other people do. Geoffrey Grosenbach during his talk today, he had gone to a bed and breakfast and these people recognized him and said "Oh, you are Geoffrey Grosenbach! We use your charts inside our bed and breakfast software. There are all these little slivers that are out there and I never know which one is going to work, but I take a measurement approach - I throw a bunch of them out, then I test them. I think usually, by the time you hear about a company it's been successful, they've tried about a half a dozen of other things - this is the story behind those successful stories.

I don't know for sure, but I imagine that ICanHasCheezBurger folks and the TinyURL folks and all these other folks - they've tried a lot of other things, but they don't talk about that because that's the fail story. They always want to put out the good PR about the success story. I was thinking about this a little bit - there is almost a fashion industry analogue: we have the venture capital industry that supports software. They set this ideal, almost body-like image: you pick up a Cosmo magazine, most people don't look like the people look like in Cosmo. Well, most developers aren't Mark Andriessen or David Heinemeier Hansson or any of these kind of celebrity superstar, rock star, whatever you want to call it folks.

Think that you can get past that body image, you can say "That might be ideal but it's not everyone" and you can start to think "What are some of the elements of what they do that I can apply to myself?" You can do it a fashion where you control your own destiny and that's really unique. Perhaps we are going out a little bit here, but I think, at a time in our evolution as society we are getting past the mass consumer world. I am a big fan of this website www.etsy.com. It produces a website for folks who built handmade goods. What they've done is intermediate it: they find folks who want cool cases for the Mac laptops, or handmade furniture and they connected with the folks that make them.

We've really gone from this society where we have 4 channels to 500 channels, at the same time I think we're going from places where we have a small number of selections, a small number of opportunities to either buy a product or build a product, to something where there is a tone of them. There are all kind of wrap-ups together, just there isn't necessarily a money guy behind it to tell the tale how this happens. This kind of thing that I'm talking about is happening organically, you see people springing up all over the place, so it's not necessarily Silicon Valley, it's in Minneapolis, it's Omaha, it's Boston and everywhere in between.

Absolutely. I had a Long Tail in the slides and I wasn't sure of whether I would use it or not. I didn't want to sound like some MBA guy, but it's exactly the case. My earliest experience was with a company called Link Exchange. Link Exchange had acquired a 3 person startup that I had, it was an early e-commerce company. Link Exchange was the very first ad network that took hundreds of thousands of websites and correlated them all together. When you look at the Long Tail analysis when they talk about showing Google's ads throughout tens and tens of thousands of websites or when they look at music analysis and they are talking about their places where a track is selling 10 times a month - you could never put that into a retail store, but on the Internet, where everything is free, it works.

This is absolutely a Long Tail and the thing about it is I don't think we could have done this kind of entrepreneurism 10 years ago, because 10 years ago we couldn't treat everything as free. These days, in my server - and it's the last physical server I'll ever buy, the next one I'll buy will be a slice, but I've got a 2,000 $ server - I've got mirrored drives and a bunch of memory and I can run every company idea on it until the point I know I am going to be successful. I can completely treat that as free. That Long Tail component isn't really supportable unless you can treat a bunch of stuff as free and up until this point we couldn't really do that. It's really a wonderful time to try ideas, we are coming near spare time and figure out which one is going to ultimately make you your own boss.

The first thing I would say is try not to be on your own. I don't really believe you can do a one person company. There are certain examples of that - there is the pretty good solitary guy who is basically a one man show for a long time. Think that there is an emotional component to this that people might discount. When you read biographies, when you read history you see these people who never faultered in their determination to make things through. I'm like a leaky tire - I need someone else who I can bounce the idea off, otherwise my enthusiasm is going to leak out over time.

The first thing to do is go to your local user group, your local bar camp, your local watering hole where geeks hang out and find someone else who, when you talk to about it, you have unexpected finishing each other's sentences kind of moments. You find someone who has the same passions and it's not hard to do. We stepped just lately outside of our cubical, we find other people around us who have the same interests and so on, and that's how all these things start. When I look at most of these little companies, that are springing up, usually what happened is that they started over a lunchtime discussion, over drinks afterwards. You have the day job, just look around, look at your colleagues in a slightly different way - don't look at them as people you are still competing with, but look at the folks who you are going to buikd your next idea with. I think that's the way you get started.

I am a big fan of youth and inexperience. The most fun I ever had and the best ideas came out of my just-out-of-college era. I had at the time no kids, no house, no responsibilities, so it was a great thing to be said for that. That said, you make different mistakes at different stages in your life. Early on, we were probably poor programmers and probably poor business people, but the marketplace was actually that .com ideas were interesting, so a lot of that stuff got forgiven. Now, I think I move the ideal age up a little bit.

I don't think someone mid 30s - wife, kids, house -, I don't think it's a bad time for someone my age to start it because I can look at all that track record as "Now I spend time figuring out how I am going to hold my game as a programmer, hold my game as a business person". I don't think there is so much a particular age that's going to matter. What I think is interesting is how you are going to approach collaboration. I am a fan of the game theory, of the whole notion of how you decide to behave to maximize your own benefit.

There is this great book called Evolution of Cooperation that looks at how you, as an individual, are going to get the most for yourself. It's a very complex topic, but ultimately it boils down to anyone you meet you give him the benefit of the doubt, the first time - they call it "tit for tat". You give the benefit of the doubt the first time and then as long as you do well by me, I continue to do well by you. As soon as you do something wrong for me, I am going to screw you and I am never going to look back. I found that they are relying on the kindness of strangers - that kind of cliché that you've heard in the movies.

Actually, it works remarkably well. People want to help. There is an infectiousness about entrepreneurism and there are people who want to help you work out your idea - it makes them feel smart. When you talk to somebody about an idea, there is this psychological urge to say "How about this?" and "How about that?" The switching point is, if it's all these "Here are all the things that are wrong with it", those are probably not the right folks, but if, in a conversation of the idea they are saying "How about this?", those are the people you go after.

It's interesting: Obie was talking about having a set of rules that you live by and you write them down and you often do that. I've always tried to do that with the businesses - I said "OK, this is solving these technical problems. I am going to be into the market for this long" and you put an arbitrary cut off. And you say "OK, if we are not getting the kind of feedback, if we are not getting some number of viewers or some amount of buzz or some amount of talk, then it's over." Every single time, I've approached that line, I kept pushing it further and further out.

In a way, it started a little bit like a marriage. I'm pleased that my marriage has been successful, but I know that there are folks who said post-divorce, that there was just a day when they woke up and they said "This isn't right." The thing about it is to avoid doing it too early or avoid doing it too late and that's the real game of this: trying to do this yourself you almost always are going to get out too early, having a partner helps you push it to a more reasonable place, as long as you are not both so enthusiastic that you almost cult like following your own ideas. Two people pair off each other well enough to be able to say "OK, we've reached the point where this is not working out.

Let's go on!" I always tried 5 ideas at a time. I don't want to spend 6-12 months head down, writing code, hoping that what I come up with works in a market. I want to throw at least a little bit of code out there. The company that ultimately sold to Microsoft was 2000 lines of poorly written Perl code. They have just leveraged the hell out of it, so it's good to write as little code as possible.

That's a great question. I almost never get ideas from technical sources, that's why I like this conference. This conference isn't just tech, is tech plus a sort of creative element to it. I think the thing to do is to be always trying new things. I started taking guitar lessons a couple of years ago and it has slightly changed the way I think. I read about cults and there is a book by Erik Schlosser called Reefer Madness - it's about the 3 underground industries, about marijuana growth, pornography industry and immigrant labor. You read these things that seem so far afield because what they do is they provide this baseline for you: psychology, mythology, historical biographies, all these kind of things.

Then, you think about all those things while you are reading about cloud computing or you think about those things while you are reading about something infrastructure. These things come together - there is little historical analysis, where you make just a tiny little leap and it's a leap that hopefully no one else has made or other people that have made don't follow through on it the way you do. It's almost always in that analogue for me - I don't usually have this sort of fresh ideas, it's more of "I've always been thinking about this little notion from our society or culture" and then here is a little piece of technology that I can pair to that and something new and interesting comes out of it.

I have an idea for an ultimate reality game that is based on all things of pandemic simulation. I think it's going to be the ultimate social application, but I can't say anymore about it until we get a little further down the road on it.